EU Gravediggers: Domestic Market Protectionism

The UK is leaving the EU. Yet, it is not the gravedigger I was referring to in the title of this article. Nor are the so-called eurosceptics from various EU member states. Paradoxically, the EU is being buried by those who praise it the most. They demand equal conditions on the internal market and despite the fact that it might seem a legitimate claim, they are, in fact, attacking one of the two pillars (peace and economy) of the European project.

I´m sure you have noticed media reports about the truckers from Eastern Europe who are being stopped and asked for documents proving that their employers pay them wages in accordance with the laws of the country they are passing through (mainly France and Germany). However, this is not just about the truckers, nor France or Germany. This is just the tip of a much older iceberg. When the EU admitted 10 new members in 2004, the rest of the older member states enforced transitional periods to protect their inner markets from new competition. After these transitional periods ended, they were supposed to open their markets, but instead they kept protecting them in a differet way.

Austria is a textbook example. In 2004, it negotiated an exemption which granted that the country was not obligated to make its domestic market accessible to cross-border competition, while the transitional period was prolonged to seven years. The period ended in 2011 but by then the state legislature had already passeda law against so-called social and wage dumping, which became a new hurdle for providing cross-border services. These services include transportation, the construction industry, consultancy, and all other economic activities that fall under the label of services.

As the power of foreign competition grew, especially from neighboring countries, Austrian legislation was gradually tightening up to restrict it. The beginning of 2017 already saw the fifth legislative change coming into force since 2011. Plenty of companies from Slovakia, the Czech Republic, Hungary, and Slovenia have been ringing the alarm bell ever since. And the numbers are startling. According to Austrian data from 2015, there were 3,589 companies from Slovakia with 11,404 employees operating on their market. Slovakia is the fourth biggest country providing cross-border services on the Austrian market. Germany, Hungary, and Slovenia are all ahead of us.

The Austrian legislation is difficult to meet. It was written deliberately that way. The obligation to ensure that employees in Austria have the same social and labor standards as domestic workers is an economic nonsense. When a company from Prešov sends its driver to Bratislava for a period of two days, we do not require it to pay him “Bratislava´s” wage. Companies encounter in Austria a lot of bureaucracy which is just very much absurd. There are duties in terms of registration and de-registration and heavy redtape that exist nowhere but in Austria. However, these administrative burdens have a premeditated auxiliary purpose. Fees are being charged not only for a failure to meet legal obligations but also for a relatively small administrative misconduct. A company can be fined up to millions of euros, while Austrian authorities have the right to freeze company funds up to the amount of the charged fine.

So the next time you hear some know-it-all people blatantly talk about disintegration trends in the EU, make sure to recall this article. Their frivolous boasting will not contain a word about the real gravediggers who are lurking just around the corner.